Bank of Canada Raises Key Interest Rate, Says U.S. Weakness Trims Outlook
Posted by Guy Close on 09/08/2010
Guy Close -
The Bank of Canada raised its benchmark interest rate today for a third time this year, and said it expects households and businesses to spend even as the outlook for the U.S. economy weakens.
The bank raised its target rate for overnight loans between commercial banks to 1 percent from 0.75 percent, matching estimates from 14 of 20 economists surveyed by Bloomberg. While the country’s recovery will be “slightly” slower than it had projected because of a weaker outlook for the U.S. economy, inflation is in line with expectations, it said.
“Consumption growth is expected to remain solid and business investment to rise strongly,” the Bank of Canada said in a statement. “Both are being supported by accommodative credit conditions, which have eased in recent weeks mainly owing to sharp declines in global bond yields.”
The Canadian dollar gained on the comments and investors increased bets the central bank will continue raising interest rates to remove stimulus. The yield on December 2010 bankers’ acceptances contract, the most actively traded contract, jumped to 1.30 percent, its highest in a month. The contracts have settled an average of about 20 basis points above the central bank’s overnight target since 1992, Bloomberg data shows.
Guy W. Close
Financial Advisor
705-444-8486
guy.close (at) sympatico.ca
Serving Collingwood, and the Blue Mountains since 1996
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